Customer Lifetime Value and LTV:CAC Calculator
Put in your price, gross margin, churn and CAC. You get what a customer is worth over its lifetime, your LTV:CAC ratio and the months until a customer pays back what it cost.
What is a good LTV to CAC ratio?
3:1 or more. A customer should bring back at least three dollars of gross profit for every dollar it cost to win. In SaaS Metrics 2.0, investor David Skok found the best SaaS businesses above 3:1, some at 7 or 8, and set a second check: earn back CAC within 12 months. Under 1:1 you lose money on each customer. Many young companies sit under 3:1 while they work on churn and price.
How we work it out
Each customer is valued on gross profit, not revenue, the same way the CAC Payback Calculator does it.
| Number | How it is worked out | What it tells you |
|---|---|---|
| Gross profit per month | Price per month × gross margin | What a customer leaves you each month after the cost of serving them. |
| Customer lifetime | 1 ÷ monthly churn, or the average lifetime you enter, up to the LTV horizon | At 3% monthly churn the average customer stays 33 months. |
| Revenue lifetime | 1 ÷ (churn − expansion), up to the LTV horizon | How long a customer's revenue lasts, upsells counted. |
| LTV | Gross profit per month × revenue lifetime | Gross profit a customer brings before they leave. |
| CAC | Your CAC, or sales and marketing spend ÷ new customers | What one new customer costs. |
| LTV:CAC | LTV ÷ CAC | Gross profit back for each dollar spent to win a customer. |
| CAC payback | CAC ÷ gross profit per month | Months until a customer pays back what it cost. |
| Most a customer may cost | LTV ÷ 3 | The highest CAC that keeps the ratio at 3:1. |
Three levers move the ratio
LTV:CAC has three inputs you control. Change one in the calculator and watch the ratio move.
Price
A higher price raises LTV and cuts payback at the same time, with no change to CAC.
Churn
Churn sets how long a customer pays. From 5% to 3% monthly churn, the average customer stays 33 months instead of 20, and LTV grows by two thirds.
CAC
Ads in your buyers' own words and fewer drop-offs between click and payment lower what each new customer costs.
We measure your CAC, payback and customer value every week in data and analytics, part of the Growth Strategy™.
More Growth Strategy™ tools: CAC Payback CalculatorSaaS Ad Budget CalculatorChannel Finder
Frequently asked questions
How do you calculate customer lifetime value?
Take what a customer pays you each month, keep the gross margin, and multiply by the months they stay. At $100 a month, 80% gross margin and 3% monthly churn, a customer stays 33 months on average and brings about $2,667 of gross profit.
What do LTV and CAC stand for?
LTV is lifetime value: the gross profit a customer brings before they leave. Some call it CLV, customer lifetime value. CAC is customer acquisition cost: what you spend to win one new paying customer. LTV:CAC compares the two.
Monthly churn or average lifetime: which should I use?
Use the one you know. They are one number seen two ways: 4% monthly churn means customers stay 25 months on average, and a 25-month lifetime means 4% churn. If your product is new, take churn from the last few months and update it as you learn.
Why is LTV capped?
With very low churn, or expansion above churn, the formula says a customer pays for decades. The LTV horizon, 60 months to start, keeps LTV to a time you can plan for. Set it to 0 to remove it.
How is this different from the CAC Payback Calculator?
This one starts from a CAC you already know. The CAC Payback Calculator works CAC out from your ad spend and funnel, and adds net revenue retention and the magic number. Both value a customer the same way.
Is what I enter saved?
No. The calculator runs in your browser and sends nothing, to us or to anyone else. Your numbers stay in the page address after the # sign, which a browser does not send to a server, so you can bookmark or share a scenario.
Let's bring in the customers, together.
As a first step, book a free 30-minute strategy call with Ovidiu.
You leave with a plan: which channel, how much, what first.